What Punishment should a person have to face under Section 138?

Date : 08-02-2019 17:00

What
punishment should a person have to face under section 138?

Under section 138 of N.I. Act provisions are for double of
amount of cheque or one year imprisonment
or both. This is a bailable offence.
Though it is a summary suit of criminal
nature, even the procedure of CrPC
has to be adopted for evidence and cross examination of witnesses. There are guidelines from Supreme court to dispose of matter
under section 138 of N.I. Act within
6 month time but practically it is
not being done by the lower courts.

The
dishonour of cheque is a criminal offence and is punishable by imprisonment up
to two years or with monetary penalty or with both.

In Section 141 of the Negotiable Instruments Act, every person who, at the time the
offense was committed, was in charge of, and was responsible to the company for
the conduct of the business of the
company, as well as the company,” thus even the directors of a company may be liable. Only people who were in
direct charge of the company with the power to direct day-to-day ongoings of
the company will be held to be liable.
If a director was at the time of the
offence, not responsible or in charge of the company, then he/she would not be
liable even if the name director is attached.
Further, it has been provided in clause
2 that the directors, managers and
any other people holding office by whose
consent, connivance, negligence has caused the offence, he/she will be liable.

When
a cheque is dishonoured, the drawee bank immediately issues a ‘Cheque
Return Memo’ to the banker of the payee mentioning the reason for non-payment.
The payee’s banker then gives the dishonoured
cheque and the memo to the payee. The holder or payee can resubmit the
cheque within three months of the date on it, if he believes it will be honoured the second time. However, if
the cheque issuer fails to make a payment, then the payee has the right to
prosecute the drawer legally.

The payee may legally sue the defaulter
/ drawer for dishonour of cheque only if the amount mentioned in the cheque
is towards discharge of a debt or any other liability of the defaulter towards
payee.
If the cheque was issued as a gift,
towards lending a loan or for unlawful
purposes, then the drawer cannot be prosecuted
in such cases.

Legal action

The Negotiable Instruments Act, 1881
is applicable for the cases of dishonour of cheque. This Act has been amended
many times since 1881.

According to Section 138 of the Act, the dishonour of cheque is a criminal offence and is punishable by
imprisonment up to two years or with monetary penalty or with both.
If payee decides to proceed legally, then the drawer should be given a chance
of repaying the cheque amount immediately. Such a chance has to be given only
in the form of notice in writing.
The payee has to sent the notice to the drawer with 30 days from the date of receiving “Cheque Return Memo” from the bank. The notice should mention that
the cheque amount has to be paid to the payee within 15 days from the date of receipt of the notice by the drawer. If
the cheque issuer fails to make a fresh
payment within 30 days of receiving the notice, the payee has the right to
file a criminal complaint under Section
138 of the Negotiable Instruments Act. However, the complaint should be registered in a magistrate’s court within a month of the expiry of the notice
period. It is essential in this case to consult
an advocate who is well versed and experienced
in this area of practice to proceed further in the matter.

On
receiving the complaint, along with an
affidavit and relevant paper trail, the court will issue summons and hear
the matter. If found guilty, the
defaulter can be punished with monetary penalty which may be twice the amount
of the cheque or imprisonment for a term which may be extended to two years or
both. The bank also has the right to stop the cheque book facility and
close the account for repeat offences of bounced cheques.
If the drawer makes payment of the cheque amount within 15 days from the date
of receipt of the notice, then drawer does not commit any offence. Otherwise,
the payee may proceed to file a complaint in the court of the jurisdictional magistrate within one month
from the date of expiry of 15 days prescribed in the notice.

Penalties

The
penalties that can apply to a drawer when a cheque bounces are as follows:

1.Imprisonment which may extend
to 2 years.

2.A fine double the amount
which was supposed to be paid.

3.Maximum punishment is 3 years
with fine that can amount to double the amount of cheque,for remedy legal
notice should be sent and then criminal complaint under section 138 negotiable
instrument act.

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